US government sends healthcare funds to worried states

WASHINGTON, Feb 24 (Reuters) - The federal government on
Thursday announced funding to help U.S. states evaluate health
insurance rates and run preventive medicine programs, just as
many state officials worry they cannot afford to carry out
reforms included in the massive healthcare law.

Starting in August, states can apply for three-year grants
worth $3 million to create or enhance their reviews of the
premiums health insurance companies charge, said Steve Larsen,
director of the Health and Human Services Center for Consumer
Information and Insurance Oversight.

A year later, they can apply for a second round of two-year
grants worth $2 million, Larsen told a conference call with
reporters.

The federal government is also offering about $50 million
of grants to help states with the extra workload that comes
with increased rate evaluations and to reward states that have
authority to block unjustified insurance rate hikes.

The healthcare reform law passed past year aimed to make
the health insurance market more transparent. But surges in
insurance rates caused the federal government to call for more
scrutiny on how rates are set and for stronger oversight by
states, which regulate insurance.

Many states could not afford to beef up their oversight or
make information about insurance accessible, said Larsen.

"We are confident that states will have effective review
processes. This absolutely helps them to get there," he said of
the new grants.

They were announced on the same day the federal government
said it will put $100 million into state efforts to prevent
chronic health problems, with the hope of driving down the
costs of covering those problems.

States can use the money to encourage those enrolled in the
Medicaid program for the poor to quit smoking, eat better or
exercise more, the agency said.

States are charged with carrying out numerous provisions in
the plan President Barack Obama championed to help Americans
afford healthcare. They also must establish insurance exchanges
and expand the Medicaid program to include more people.

After the financial crisis and 2007-2009 economic recession
caused historic revenue collapses in almost all states, many
officials are worried they cannot cover costs of the reforms.

"States are concerned about the new costs that accompany
their enhanced responsibilities, particularly as their revenues
are only now beginning to to recover from very troubled fiscal
times," the Kaiser Family Foundation said in a report released
on Thursday.

"While all estimates show some new costs for states
associated with the large expansion of Medicaid, the
[healthcare law] also creates new savings and revenues for all
states, along with opportunities for states to achieve further,
often longer-term savings," it added.

The grant announcements come just days after the federal
government said it would send states money to provide home
healthcare to Medicaid enrollees.

Still, not all states believe they should have to carry out
the reforms. More than half are challenging the law in federal
court, saying it threatens individuals' and states' rights.

The Republican majority in the House of Representatives is
also questioning costs put on states as members seek to repeal
all or part of the healthcare law. The House Energy and
Commerce Committee will hold a hearing next week on the law's
impact on Medicaid and the states.

Kaiser said there were many areas where states can realize
substantial savings and gains under the healthcare reforms.

For example, some individuals who have relied on
Medicaid will instead buy their insurance from private
companies through the exchanges and states will not have to pay
for their healthcare.

At the same time, because many states tax insurance
premiums, their revenues will rise as more people purchase
insurance, it said.
(Reporting by Lisa Lambert; Editing by Dan Grebler)